Small Business Resource

(From Jeff Milchen, co-founder of the American Independent Business Alliance)

Economic Value of Independent Businesses

It’s time to consider the real costs to a community that loses its locally-owned business base. Independent local businesses employ an array of supporting services. They hire architects, designers, cabinet shops, sign makers and contractors for construction. Local accountants, insurance brokers, computer consultants, attorneys, advertising agencies help run it. Local retailers and distributors also carry a higher percentage of locally-produced goods than chains, meaning more jobs for local producers.

In contrast, a new chain store typically is a clone of other units, eliminates the need for local planning, and uses a minimum of local goods and services. A company-owned store’s profits promptly are exported to corporate headquarters. Dollars spent at community-based merchants create a multiplier effect in the local economy that, by most findings, typically amounts to three times that of a chain. This is well-evidenced by a 2003 economic impact study by our IBA in Austin, Texas that concluded for every $100 spent at a chain, $13 remained in the community while $45 remained when spent with home town businesses.

Ensuring Choice and Diversity

Retailers sift through competing goods and services to find those appealing to their customers. Though a single local shop may carry a smaller selection than a big chain, a multiplicity of independent retailers creates great diversity. When thousands of independent book and music shops serve their local tastes and each owner’s preferences, the result is demand for a wide variety of ideas and music. This makes accessible controversial books or music from new artists with the expectation that a market exists somewhere within a variety of stores. As fewer giant corporations dominate production and sales, our options –
determined by a powerful few — dwindle. Our freedom of choice is imperiled when a few buyers from national chains choose what reaches customers — perhaps moderately disturbing for most goods,
but truly frightening when you consider the impact on our choice of news sources, books, music and other expression modes.

Maintaining Community Character

When asked to name our favorite restaurant, cafe, or shop, it’s typically a unique local business. Just look at the results in any community’s “Best of” polls as proof. Those businesses define our sense of place, but we often forget their survival depends on our patronage. Local owners, typically having invested much of their life savings in their businesses, have a natural interest in the community’s long-term health. Community-based businesses are essential to charitable endeavors, and their owners frequently serve on local boards and support numerous causes. Yes, some chains give back to towns in which they do business, and not all local businesses are exemplary models. However, the overall impacts are clear: locally-owned businesses play a vital role in our community that chains rarely do, while chains often even undermine community interests. For long-term progress, a conceptual change also is necessary. We must consciously plan that future with rules that will encourage the values we want reflected in our communities. And each time we spend a dollar, we would do well to weigh the full value of our choices, not solely to ourselves immediately, but for the future we want for our home towns.